Sergii Gerasymovych looked for cheaper power sources in 2018 when another bear-market depressed crypto prices. He told CoinDesk that the CEO and cofounder of EZ Blockchain began learning about associated gases, a byproduct from oil drilling, which is a promising energy source for miners.

Gerasymovych is a Forbes 30 under 30 winner for 2021. He did some research, and discovered that the gas flared from oil wells produces much more CO2 than cars. All that gas that oil producers have traditionally burned off is actually an enormous source of energy.

Gerasymovych stated that “one oil well can provide enough natural gas for 1.5 megawatts of electricity to be continuously generated.” “And there are hundreds of them.”

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This source of energy is not as inexpensive as it may seem. It can be a technological challenge. The gas that comes out of oil-wells is not methane alone, but a mixture of other gasses like butane and propane.

This makes power production expensive. The cost of generators that produce 1 megawatt from these sources can reach $700,000. Gerasymovych stated that a 10-megawatt power farm would cost $5 million plus $1 million in installation costs. He added, “And then the oil and gasoline company will say, sorry but the gas isn’t stable.”

Gerasymovych, however, persisted, because he liked to use energy that would have otherwise been wasted. He also liked the idea that using gas, which causes climate change, could help the environment.

Flammable material

Methane, along with other hydrocarbon gases, are pollutants that play a major role in global warming. Methane is 25-times more conducive for the greenhouse effect than carbon dioxide (though it spends less time in our atmosphere). Methane is also produced by agriculture, and livestock (think of belching cows). This accounts for 14,5% global greenhouse gases.

A drilling company must prevent methane emissions from a new oil well. Oil producers have several options. The gas can be flared (burned) to emit CO2 instead of methane. The gas can be sold via pipeline or in a liquefied form. You can use it to make electricity or materials such as polyethylene. They can also bury it. Gerasymovych envisioned directing this byproduct into a power generator to make electricity and mine bitcoin.

The associated gas is used in crypto mining to avoid flaring pollution and put the gas to use instead of wasting. Does it benefit the environment? This question is hotly contested.

Read more: George Kaloudis, Through It All, The Bitcoin Mining Industry Seems to be Growing

Bitcoin mining, say opponents, makes oil drilling profitable and keeps the industry relevant for longer than necessary. This delays a move away from fossil fuels. For environmentalists, mining bitcoin with fossil fuels is an outrageous luxury in a time when weather patterns are becoming increasingly unpredictable.

What’s the real truth? CoinDesk examined some facts and figures.

Flaring is out

Even though there are many ways to handle the associated gas in practice, it is costly to build infrastructure that can deep process or deliver this gas to customers. Oil companies often just flare the gas, even though penalties are involved. Experts say that these penalties are often negligible in comparison to the revenue of oil and gas companies.

The International Energy Agency describes gas flaring in terms of “an extraordinary waste of money, as well as its negative impact on climate change and the health and safety for humans.” Leading oil and gas companies, such BP, Eni TOTAL, Statoil, joined the World Bank’s initiative to reduce flare gas emissions by zero by 2030.

The World Bank reports that in 2022 oil companies will have emitted more than 357 millions tons carbon dioxide by flaring associated gases. The World Bank said that if all the gas were used to produce electricity, it could power Sub-Saharan Africa.

If the oil field, however, is located in a remote area with no nearby residents, then there will be no one to consume the power, and it would be difficult to transport it to a nearby village or city.

Some regulators are taking a more aggressive stance to eliminate flaring. This has forced companies to find alternatives. In Colorado, for example, state authorities have banned flaring completely. By 2022, “half-a-dozen” oil producers will be mining cryptocurrency on their sites. The Colorado Sun reported in August.

It may even be more profitable to use the gas for crypto mining than to sell it as fuel. Vygon Consulting estimated in February that the associated gasoline available in Russia would bring in $1,4 billion in revenue per year for miners, while the associated fuel is only worth $77 million to oil and gas companies.

But, it is not without its problems. Miners do not use it very often.

More cons than pros

Troy Cross, professor at Reed College of Philosophy and Humanities, said that five years ago, when Gerasymovych conducted his research, bitcoiners had the chance to use associated gas free. Cross told CoinDesk that once the oil and gas industry realized there were enough miners using this source of energy, they began charging for it.

Now, associated gas-fueled electricity has some disadvantages that are not just about the price. It’s not a constant stream large enough to power a mining farm that needs to run 24/7.

Read more: Anthony Power, How Miners are Preparing for Bitcoin’s Next Halving

The first few months after drilling, there’s usually a large amount of gas. But later, it becomes less constant, and the output varies throughout the day. This causes interruptions in the mining.

Gerasymovych explained: “You have enough gas to power 1 megawatt now, but another time only 600 kilowatts.” If you look at it as a whole, there are more disadvantages than advantages for a miner.

This convinced him that EZ Blockchain, rather than try to mine in oil fields itself, should instead provide technology and equipment to oil and gas companies who are willing to mine for themselves. He hasn’t received much interest from the fossil-fuels industry. There are no incentives.

Gerasymovych stated that “oil and gas companies have a strong incentive to reduce emissions. However, the regulations aren’t as frightening as people thought they would be.”

Bitcoin mining was more popular during the pandemic when oil companies were looking for extra income sources as their revenues declined. Gerasymovych says that with oil and gas prices higher, there’s less motivation to mine bitcoins.

Save fossil fuels

Researchers have suggested that extra revenues from bitcoin mining could incentivize oil companies to drill gas wells exclusively to power mining farms.

In a written statement, Alex Formuzis said that the heavy reliance of Bitcoin miners on flare gas is concerning and perpetuates the use fossil fuels which are the main causes of climate change. He added that “it’s important these mining operations, and the wider cryptocurrency community, follow the example of Ethereum and other crypto-currencies by changing their business practices to be less energy intensive.”

Gerasymovych is not convinced. He said that there was no enthusiasm from oil producers to begin mining associated gas. Only a dozen oil companies in the U.S. purchased EZ Blockchain’s miner containers. Usually, it is not large companies, but rather mid-sized ones.

Gerasymovych stated that the price of bitcoin is currently low and there are regulatory uncertainties. Bitcoin offers a small bonus to oil and gas profits. A farm that produces 420 barrels per day would be powered by a megawatt. Gerasymovych stated that with the current oil price at $75 per barrel and the bitcoin value of today, the company could make $1,200 in mining and $18,000 in oil production.

Joshua Archer is the Greenpeace USA Bitcoin campaign leader. He believes that this argument only works until bitcoin prices rise. He told CoinDesk that when the price increases, mining will become more attractive. This will encourage oil drilling which should be stopped.

Read more: Jeff Wilser, Crypto Miners are Pivoting To AI (Like Everybody Else).

Archer stated that the continued use of fossil fuels will worsen the problem if the value of bitcoin continues to grow. He said that it is also concerning that the bitcoin network continues to consume more and more power as it grows.

Greenpeace is advocating for bitcoin to switch away from the energy-consuming proof-of-stake mechanism altogether – a non-starter for bitcoiners who believe that proof-of-work is exactly what makes bitcoin uniquely decentralized and censorship-resistant.

Finding a consensus

On the other hand from an emissions perspective, turning associated gas to electricity is better than flaring. environmental groups such as WWF also agree with . Depending on the efficiency, flaring can convert as much as 98% methane or other gasses that come out of an oil-well into carbon dioxide and/or water. However, in reality, this efficiency is not that high, and often only 91.1% of methane gets destroyed.